For readers who aren’t afraid of the math, and want to go a little further, here are the four basic formulas every investor should know.

**Formulas**

**Future Value of a Single Sum**: To find the future value (FV) of an amount you invest today, or present value (PV), here is the formula for the future value of a single sum:

FV = PV(1 + i)n)**Where:**

FV is the future value of the investment

PV is the present value of the investment

i is the interest rate you expect to earn each investment period

n is the number of periods you plan to invest.

For example, if you want to know how much money you will have in 20 years, if you invest $1,000 today, earning 10% each year:

FV = $1,000/(1 + 0.10)20

FV = $6,727.50

Your $1,000 (PV) investment will grow to $6,727.50 in 20 years, if it earns 10% each year.

**Present Value of a Single Sum**: To find the present value (FV) of an amount you will receive in the future (FV), here is the formula for the present value of a single sum:

PV = FV(1/(1 + i)n)

For example, you plan to retire in 15 years, and want to know how much your $1,000,000 retirement nest egg will be worth in today’s dollars, adjusting for 3% inflation:

PV = $1,000,000(1/(1 + 0.03))15

PV = $641,186.95

That is, a $1,000,000 retirement nest egg 15 years from now, after adjusting for 3% inflation, will feel like having $641,186.95 of today’s dollars.**Future Value of an Annuity**: To find out how much a regularly scheduled investment (R) will grow to in the future, here is the future value of an annuity (FVa):

FVa= R [((1 + i)n-1)/i]**Where:**

FVa is the future value of an annuity (an annuity is a constant amount invested at regularly scheduled intervals),

R is the regular amount invested (also called a Rent),

i is the interest rate you expect to earn each investment period

n is the number of periods you plan to invest.

For example, how much money would you have if you retire in 30 years, having invested $5,000 each year, earning 13% each year.

FVa= $5,000 [((1 + 0.13)30-1)/0.13]

FVa = $1,465,996.08

That is, if you invest $5,000 at the beginning of each year for the next 30 years, and it grows at 13% each year, you will retire with $1,465,996.08. **Present Value of an Annuity**: To find out how much a regularly scheduled investment (R) is worth today, here is the present value of an annuity (PVa):

PVa= R [1-(1/(1 + i)n)]/i

For example, if you win the lottery that pays out $50,000 each year for the next 20 years, and you could earn 12% on that money, what are your winnings worth today?

PVa= $50,000 [1-(1/(1 + 0.12)20)]/0.12

PVa= $373,472.18

That is, receiving 20 payments of $50,000 at the beginning of each year for the next 20 years is the same as receiving $373,472.18 today, if you could invest those winnings at 12% today.